REDUNDANCY IS NOT VALID WHERE THE EMPLOYEE WAS TERMINATED FOR SUPERFLUITY OF FUNCTION THAT IS NOT PART OF HIS JOB DESCRIPTION

Redundancy is recognized as one (1) of the authorized causes for dismissing an employee under Article 298 of the Labor Code. Citing Wiltshire File Company, Inc. vs. National Labor Relations Commission, the SC explained that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.

But there is no valid redundancy where the employee was declared redundant for function that is not part of his job description. Hence, the SC held in the following case:

Acosta vs. Matiere Sas and Philippine Gouvary
G.R. No. 232870, June 3, 2019

Redundancy; Redundancy cannot be said to be in good faith if the function declared redundant is not part of the job description of the affected employee; The termination of employee whose functions cannot be similarly equated with co-workers declared redundant is not valid

Facts:

Matiere SAS is a French company engaged in the fabrication, supply, and delivery of unibridges and flyovers. Matiere SAS and the Department of Public Works and Highways executed a contract for the construction of flyovers and bridges. Matiere SAS also entered into a contract with the Department of Agrarian Reform to construct bridges for better access to agricultural lands.

Matiere SAS, represented by its resident manager Philippe Gouvary (Gouvary), executed a Consulting Agreement with Petitioner Manuel Acosta (Acosta). Per the agreement, Matiere SAS engaged Acosta as its technical consultant for 12 months.

Thereafter, Matiere SAS sent Acosta a letter with the subject, “Ending of the employment agreement“ due to due to the cessation of delivery operations and the diminution of company activities. Further, it states that it cannot find any reinstatement at its office.

Matiere SAS informed the Department of Labor and Employment that because its last shipment had been delivered, it would have to terminate the employment of its five (5) workers including Acosta. Matiere SAS stated that four (4) of them were “assigned to the stripping operations while, Acosta, who was based in the office, was “primarily in charge of the monitoring of shipments.

On June 28, 2013, Matiere SAS filed before the Department of Labor and Employment: (1) an Establishment Employment Report, citing redundancy and the completion of delivery of supplies as its reasons for dismissing its employees; and (2) a List of Affected Workers by Displacements/Flexible Work Arrangements, enumerating the five (5) dismissed employees. The employment termination was made effective on July 31, 2013.

Acosta filed before the National Labor Relations Commission a Complaint for illegal dismissal against Matiere SAS and Gouvary.

LA Ruling:

The LA held that the dismissal was illegal.

The LA held that Matiere SAS and Gouvary failed to prove the factual bases for the reduction of its workforce. She pointed out that while Matiere SAS submitted a Certificate of Completion from the Department of Public Works and Highways to support its claim of project completion, it submitted no such certificate from the Department of Agrarian Reform.

Moreover, the Labor Arbiter noted that Matiere SAS failed to submit any redundancy plan. It also failed to provide “fair and reasonable criteria in ascertaining what positions are redundant and how the selection of employees to be dismissed was made.

Both parties appealed the Labor Arbiter’s Decision before the National Labor Relations Commission. Praying that the award be modified to P1,846,389.00, Acosta argued in his Partial Memorandum of Appeal that the computation of the Labor Arbiter’s award should be based on his monthly salary before his employment termination, which was P78,280.00. Meanwhile, in their Memorandum of Appeal, Matiere SAS and Gouvary contended that Acosta’s employment termination was valid and that they implemented the redundancy based on fair and reasonable criteria.

NLRC Ruling:

The National Labor Relations Commission reversed the Labor Arbiter’s Decision.

The NLRC found that Matiere SAS and Gouvary proved that there was a significant decrease in the volume of their business when they presented before the National Labor Relations Commission a Certificate of Completion from the Department of Agrarian Reform. It noted that the completion of the government contracts would render unnecessary the services offered by Acosta, whose “main function was to monitor the delivery of materials from France to the Philippines.

The National Labor Relations Commission found that Acosta and the four (4) other employees were similarly situated, noting that even if Acosta had a higher position, their tasks were all related to the shipment of materials. Moreover, since Acosta’s dismissal was not done with ill motive or in bad faith, Matiere SAS and Gouvary’s decision should be respected as a valid exercise of a management prerogative.

Acosta moved for reconsideration. He submitted a certification from Woodfields Consultants, Inc. and a certification from the Department of Public Works and Highways to support his claim that his task was not limited to monitoring shipments. He also alleged that Matiere SAS hired a certain Charlie Desamito as his replacement.

The NLRC partially granted Acosta’s Motion. It amended the dispositive portion of its Decision to include the payment of Acosta’s separation pay. Thus, Acosta filed before the Court of Appeals a Petition for Certiorari.

CA Ruling:

The Court of Appeals denied Acosta’s Petition.

It held that Matiere SAS and Gouvary were able to establish that Acosta’s position became redundant upon the completion of its contracts with the Department of Public Works and Highways and the Department of Agrarian Reform.

Acosta moved for reconsideration, but his Motion was denied by the Court of Appeals. Hence, Acosta filed the Petition for Review on Certiorari before the SC against Matiere SAS and Gouvary. Maintaining that the declaration of redundancy of his position was not based on fair and reasonable criteria, Acosta pointed out that he, the most senior engineer, was dismissed while the other engineers remained.

Issue/s:

Whether or not there is valid redundancy when the employee was terminated for surplus function that is not found in his job description

Whether or not the employee can be validly terminated for redundancy of functions with other employee whose work cannot be similarly equated

SC Ruling:

The SC granted the petition and reversed and set aside the Resolution of the CA.

The SC held that redundancy is recognized as one (1) of the authorized causes for dismissing an employee under Article 298 of the Labor Code. Citing Wiltshire File Company, Inc. vs. National Labor Relations Commission, the SC explained that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise. The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.

Further, the SC held that the requirements for a valid redundancy program were laid down in Asian Alcohol Corporation vs. National Labor Relations Commission stating that for the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1) written notice served on both the employees and the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.

Applying them to the case, the SC pointed out that assuming that Matiere SAS and Gouvary can declare some positions redundant due to the alleged decrease in volume of their business, they still had to comply with the above-cited requisites. This, they failed to do. Matiere SAS and Gouvary complied with the first and second requisites. There is no contention that they notified both Acosta and the Department of Labor and Employment at least a month before the planned redundancy. Acosta also received a computation of his separation pay corresponding to at least one (1) month pay for every year of service with additional payment for economic assistance.

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However, as to the third and fourth requisites, the SC held that to establish good faith, the company must provide substantial proof that the services of the employees are in excess of what is required of the company, and that fair and reasonable criteria were used to determine the redundant positions. Here, Matiere SAS and Gouvary’s only basis for declaring Acosta’s position redundant was that his function, which was to monitor the delivery of supplies, became unnecessary upon completion of the shipments. However, upon careful scrutiny, it was found that the Employment Agreement itself contradicts Matiere SAS and Gouvary’s allegation.

There was no mention of monitoring shipments as part of Matiere SAS and Gouvary’s tasks. If his work pertains mainly to the delivery of supplies, it should have been specifically stated in his job description. Matiere SAS and Gouvary did not even present any evidence to support their claim or to contradict Acosta’s documentary evidence. There was, hence, no basis for Matiere SAS and Gouvary to consider his position irrelevant when the shipments had been completed.

Likewise, respondents failed to show that they used fair and reasonable criteria in determining what positions should be declared redundant. Citing Panlilio vs. National Labor Relations Commission, the SC further held that fair and reasonable criteria may take into account the preferred status, efficiency, and seniority of employees to be dismissed due to redundancy.

Yet, Matiere SAS and Gouvary never showed that they used any of these in choosing Acosta as among the employees affected by redundancy. Although he was among the five (5) employees dismissed, Acosta cannot be similarly situated with the other employees. Roselim was a forklift operator, while Richard, Wilson, and Menor were helpers assigned to field engineers. The four (4) employees work directly with the delivery of supplies.

On the other hand, Acosta’s duty is not limited to the monitoring of deliveries. Accordingly, the SC declared Acosta to have been illegally dismissed.